Retirement...when, how old and how much??

[city2]

12500 less 9500 personal allowance = 3000 per annum means you will be paying tax on most of your private pension apart from your 25% tax free

 

[dickie davies]

It won’t be tax-free. Just like when you are working, you’ll pay 20% tax on everything above the ~£12.5k threshold, regardless of where your money comes from (unless you’ve already factored that into your 24k figure?)

Anything over the tax allowance which is 12500 is taxable

17k annuity + 10k state pension = 27k
Take off 12.5k which is non taxable leaves 14.5k
20% tax of that is 3k
27 minus 3 = 24

 

[NJ Blue]

My parents in law have just gone through claiming their private pensions and it’s a nightmare. They have paid thousands to the pension provider to ‘advise’ them, and then potentially are going to get clobbered with tax.

I have a private pension, but would it not be better to put it into savings and then not be subjected to ‘advice’ fees and the taxman when you want to take some of your own money out?? Appreciate that you get taxed on savings interest, but the money lost to fees and tax is like a kick in the bollocks, it’s YOUR money FFS!

 

[dickie davies]

But what happens to the £250k after you die with an annuity? If you lose it, then that might not work for people wanting to leave an inheritence.

On the Aviva annuity planner, you can ring-fence ten years of payments

But even with drawdown, if you die at a certain age the pot of cash goes with you

 

[abu13]

My parents in law have just gone through claiming their private pensions and it’s a nightmare. They have paid thousands to the pension provider to ‘advise’ them, and then potentially are going to get clobbered with tax.

I have a private pension, but would it not be better to put it into savings and then not be subjected to ‘advice’ fees and the taxman when you want to take some of your own money out?? Appreciate that you get taxed on savings interest, but the money lost to fees and tax is like a kick in the bollocks, it’s YOUR money FFS!

It doesn't work like that, you cant just withdraw your pot without paying tax. In fact if you were to take the full pot you would be hammered with a tax bill, Sure the first 25% would be tax free but then the balance could well be taxed at top rate.

 

[Tommy_Catons_Perm]

My parents in law have just gone through claiming their private pensions and it’s a nightmare. They have paid thousands to the pension provider to ‘advise’ them, and then potentially are going to get clobbered with tax.

I have a private pension, but would it not be better to put it into savings and then not be subjected to ‘advice’ fees and the taxman when you want to take some of your own money out?? Appreciate that you get taxed on savings interest, but the money lost to fees and tax is like a kick in the bollocks, it’s YOUR money FFS!

Has the money you intend to put into "savings" been earned through employment? If so, you have probably paid tax on it already.

But money you pay into a pension scheme is not taxed. It is taxed when you withdraw it instead. However, under drawdown, the first 25% is tax free and rest is taxable at your marginal rate. In fact it is possible to withdraw it all tax free if the taxable portion is below your allowance.

In summary, pensions are tax efficient. Your are likely to pay far more tax on "savings".

 

[Tommy_Catons_Perm]

On the Aviva annuity planner, you can ring-fence ten years of payments

But even with drawdown, if you die at a certain age the pot of cash goes with you

The pot of cash goes to your nominated beneficiary.

 

[Mr Kobayashi]

How do the rich get round all the tax implications of your pension? They have it offshore?

They don't have "pensions" probably.

 

[NJ Blue]

It doesn't work like that, you cant just withdraw your pot without paying tax. In fact if you were to take the full pot you would be hammered with a tax bill, Sure the first 25% would be tax free but then the balance could well be taxed at top rate.

Thanks, yes I get that. I just wondered if savings is a better option with less to stump up when you want to get at your own money. The ‘advice’ fee off the provider was eye watering.

 

[Millwallawayveteran1988]

On the Aviva annuity planner, you can ring-fence ten years of payments

But even with drawdown, if you die at a certain age the pot of cash goes with you

You can leave your unused drawdown pot but it might be taxed on the beneficiary after the age of 75 depending on how they withdraw it and what tax rate they pay.

But what happens to the £250k after you die with an annuity? If you lose it, then that might not work for people wanting to leave an inheritence.

It’s an interesting one this, and whilst you can guarantee pots with annuities and provide for a spouse if you wish, many people still prefer drawdown for the death benefits they provide.

That shouldn’t be the reason for deciding on drawdown though for me except in a few circumstances. When you start saving into a pension, your objective isn’t to leave it behind for other people. It’s to build up a pot to enjoy your retirement. I think some people lose sight of what they saved for in the first place. Ideally you should spend every penny of your pension pot before you die. Maybe leave enough for a spouse but they should then spend it. The only exception I would say are people who have other savings/investments and an IHT liability. In these situations, the pension wrapper is a useful IHT shelter and it is often better to use other sources first.

In my experience, many people tend to over save and under spend, as the fear of the rainy day is always there. However, time really does tend to catch up with people and spending drops as you get older. The nightmare of care home fees is always looming large though.